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tv   Key Capitol Hill Hearings  CSPAN  September 13, 2014 5:00am-7:01am EDT

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trying to sort out the lines, create different agencies, do different things, what we tried to do is basically take the existing structure and make it, cooperate and work more congruently for want of a better term. let me change shift to the sec, throughout the course of the testimony, you pointed out the huge issues that you still have to face. michael can you allocation is roughly 18 rules left that the sec has to complete with respect to security base swap, execution facilities, rules governing security base swap repocy together, rules regarding conflict of interests. you pointed out that you are prioritizing dodd-frank rules. can you give us the assurance that these derivative rules are at the very top of your list to get done very quickly? >> i can assure you of that. we have a number to complete, as you've pointed out. it's a very high major priority of mine to get them done as quickly as we can but also as
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well as we can and one of the areas that you also touched on is making sure that they are workable for this global market as well as strong and robust working not only with the chairman on these, i have the benefit of his prior rulemaking but our international counterparts but totally committed to getting them down. >> the point was made that the resources are getting pretty thin. is that the satisfaction at the sec? >> it's absolutely the case. >> we can talk the talk here about how you are going to get things done, how important and critical but if we don't provide you resources you can't get it done. >> i very much appreciate that. also i think we have to be focused on once these rules are finished we have to implement them and enforce them and that takes resources. >> let me shift quickly gears u[
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because we've talked what's already on the table, you got to get done, some of my colleagues suggested other things you should be interested in. one of the issues is cyber security, madam chairwoman. you have public companies reporting significant problems which leads me to believe they are not alone and that the sec has to think seriously about routine disclosure for two reasons. one is the investing public should know very quickly that there's something amiss but also if i could state what people inspect and evaluate they tend to do more of and this is an action forcing device for companies now that either feel they are free riders or, you know, they are too small, et cetera, to really begin to think take seriously their responsibilities to their shareholders ultimately in this area. are you thinking along these lines? >> certainly in terms of the priority of cyber and the long term risk it is to not only investors but the country no, question about that. as you know, senator, we issued guidance, disclosure guidance in 2011.
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we also in our division finance continue to review filings of companies understand that guidance and get comments on that. i also recently formed an interdivisional cyber working group within the sec to bring all the expertise and information together and that's one of the things that we will look at among others and obviously have cyber responsibilities for our registrant systems >> you're moving fast. we all have to microsoft move faster. thank you for extraordinary work particularly with the military lending act. can you explain why it's important to finalize some of the rules that are pending and updating the rules to protect these service men and women? >> i think it's obvious on its face and congress, of course, intervened very helpfully about a year and a half ago to require a review and revision of the
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rules that did not implement that law as intended by congress. the statute, as you know, indicated that the cfdb was to consult with the department of defense and work closely with them, organize a larger group that included the other allegations, department of treasury took a role. my understanding is that they are now moving, i think that your efforts to prod that along have been helpful, fruitful and i believe we'll see action very quickly at this point and i'm pleased to be able to say that. >> thank you very much mr. chairman. i mentioned that to secretary of defense hagel gets it from the e5 level which he was in vietnam, and we talked
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again a lot about what we owe our service men and women. we certainly owe at a minimum fair dealing in the marketplace. >> thank you for that. this will go a long way. >> senator mansion. >> thank you. i would like to first say that my home state of west virginia depend on community banks so i'll be talking about cyber security and need for reform. we just learned about home depot's data breach. it's on the heels of the target breach. according to one report u.s. banks had to re-issue 8% of all debit cards and 4% of all credit cards on average. for small community banks issuing those cards cost just over $11 per debit card and $12.70 per credit card including staff production and mailing time. this is not simply a drop in the bucket for these community banks as i'm sure you all know. these hacks could prove the difference between being in the black or red to the bottom line and make them very vulnerable. even if your agency is not
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directly responsible which i know it's not for cyber security, what's your opinion about the need for reform and how effective it is in financial markets today? i'll start with you. at that end. >> i think, senator, you're raising a new issue that we discussed in this committee. i think we did ironically the last hearing right after the target breach, i believe. pardon me. i think, again, you just sort much noted that even though there's work to do in the banking sector and there surely is and tom in a moment will explain some of what we've been trying to do. i do think that for all of us as bank regulators when we see the asymmetry in the requirements of nonbank companies or the absence of requirements for noning bank companies to protect information, it's frustrating particularly for the smaller banks but to be honest banks for
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all sizes. i think we feel to some degree we all got one hand tied behind our back. among the many other things that need to be done in this area, i think, is to get a set of expectations as to what nonfinancial companies that are not subject to the regulation of those of us sitting at this table are expected to do in protecting the very same kinds of information that our institutions hold. >> i think what i'm trying to get to is the cost that basically small banks are incurring especially in states like west virginia that depends on them basically for our banking community, if you will. and can you add anything else to that from dodd-frank that trickles down to the community bank you're just adding more harm their vulnerability. >> as the governor mentioned,
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this is an issue we're coordinating through the fiic in terms of making sure that community banks in particular are properly responding to cyber threats and we see this as actually a much larger issue than just the financial cost of re-issuing cards because it really goes to the trust between a customer and the security of their deposit or other banking relationship. but as the governor mentioned, it's really an issue of leveling the playing field in terms of the regulatory requirements between banks and nonbanks, in this case retailers. banks really have clearly long standing over a decade expectations in terms of maintaining the security of account information including electronic assess to it. we assess as part of our regulatory function their capabilities from an i.t. standpoint. we have clear rules on customer notification and notification to law enforcement and regulatory
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authorities. i think it's important similar as the governor mentioned similar requirements need to be in place for the non-bank participants in our payment system. >> okay, thank you. one more question, sir, i'm so sorry. i want to get to mrs. white. chairman white the "wall street journal" recently reported two firms are working for a bit coin to allow investors work on bit coin. i wrote a letter describing my concern that the regulators have not issued rules on bit coin. this is especially troubling since bit coin is widely speculative and especially subject to electronic theft and scams. i know your agency has taken a particularly long period of time to approve a bit coin traded fund and i would applaud your caution. however, i want to convey my
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concern with this virtual currency, again and hope that the other regulators will help you fill in the gap so you can protect our american consumers. can you give me a quick update. my time is running out. >> basically, this is an evolving area for all the regulators as you know. we've taken enforcement action, actually, bit coin involved in a ponzi scheme. we issued two separate investor alerts and we're also reviewing a filing very carefully that's key to bit coin. at this point there isn't a conclusion by our staff that the currency itself is a security, so there's not that kind of regulation that flows at this point but we continue to look at it very, very carefully and work with our fellow regulators on it as well. >> do you think you'll have a rule? >> i think at this stage there's not a planned rulemaking. at this stage we've not concluded that it is a security that would be subject to that kind of regulation by us but something we're still very
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focused on. >> thank you. >> senator. >> let me thank my good friend senator warren from massachusetts to let me bunch in line. i have to preside at noon. i have to make the point in case you guys haven't figured it out, i care about small community banks. they are the life blood, the capital life blood for the many, many people in the great state of north dakota. and i know we consistently talk about the need for reform, the need for look back, the need to have a very directed discussion about the regulatory responsibilities and how that is affecting community banks. i would like to be able to go back to my independent community banks and tell them when there is going to be regulatory relief enacted and i know there's a lot of squirrel and a lot of talk but i share senator crapo's discussion and so i'm curious about time frame, because they are making decisions today and what started out the be too big to fail has become for many of these community banks too small to succeed. they are moving out of lending in certain areas as a result of
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what they perceive to be massive regulatory burden and so if we're going stem the tide of dissolution of that portion of their business because of compliance burdens we need to offer a time frame and so i am curious to anyone who can tell me when, when we'll actually get an answer to small community banks on regulatory relief. >> senator, from an fiic perspective where we're coordinating the federal banking agencies process that is already under way. we have put out for comment a series of rules and regulations. that comment period closed. there will to be with more. we're reviewing the regulations that are under our authority to make those judgments that you're asking us to do to recommend or to eliminate the those rules and regulations under our control.
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an important part of this process, as i mentioned earlier, we're going to have direct input from community bankers. we've asked them to identify those areas where the most pressing need of change and how we can go about doing that. >> that doesn't answer the question about time. >> this is a, you know, the statute requires a fairly lengthy review process but we intend to do it as quickly as possible and to have either action taken under other independent rulemaking or to make recommendations to counsel. >> i can just comment. sometimes people when they talk about regulatory burden they lump together two sets of things. one is actual legislative or regulatory requirements, called a federal register type of requirement.
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the second thing that senator manchin maybe senator warner several of you referred to already today, somebody called it quite aptly the trickle down effect of supervisory process. yesterday we met with small bankers. they were a good group. the reason i thought they were a pretty good group is because they came in with specifics. they came in with specifics that said look here's a way in which some articulated supervisory expectation is we think is not appropriate for us, creating a problem for us and we kind of think it's trickling down and in some cases i think they were right. it's good for our staff to thereabout to hear it as we've done with groups of small community bankers in the past. we got a list of action items to follow up on. so although the process is formalized, i suspect the same thing is going on at the fdic, we can be in a constant process
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of changing currents practices and if you do it even at the request of a small number of smaller banks, the benefits of that can proliferate. i do think in the end we do have this problem, we have thousands of examiners and it's hard to get them all coordinated without bringing all the decisions to washington which none of us want to do. >> i'm running out of time. i have a couple more questions i want to summit for the record. but just back to this, there is nothing like certainty. i mean there can be promises that this is how -- what's going to happen in a bank audit and don't worry about this. but they will worry about it. they will worry about compliance burdens because the cost of not being in compliance is so high that just the risk will cause those banks to retreat from the
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market and i don't think that's in the best interest of this country and certainly isn't in the best interest of my state and so thank you for elevating this to one of your top concerns. i understand all of the great burdens that you all have in making sure that we don't have systemic failure, but, again, what was too big to fail has become too small to succeed and we need to fix that problem. >> senator warren. >> thank you, mr. chairman. in the past year the three largest banks in this country, jpmorgan, chase, citigroup and bank of america have admitted to breaking the law and have settled with the government for a combined $35 billion. now, as the judge of the southern district of new york has noted the law on this is clear. no corporation can break the law unless an individual within thañ
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corporation broke the law. yet despite the misconduct at these banks that generated tens of billions of dollars in settlement payments by the companies, not a single senior executive at these banks has been criminally prosecuted. now, i know that your agencies can't bring prosecutions directly, but you're supposed to refer cases to the justice department when you think individuals should be prosecuted. so can you tell me how many senior executives at these three banks you have referred to the justice department for prosecution? >> well, senator, i don't know the answer to that question, but here's -- i want to pick up on something you just said because i think it's actually quite important. that although failures of the sort that have resulted in these big fines, criminal and civil, almost always result from
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problems in organizations because there are many ways to catch things. >> governor -- >> hold on, if i could. there are often individuals who can clearly be identified as responsible and although as you know we don't have criminal prosecutorial power. what we do have is the power to insist that firms either discharge currents employees who have been implicated in this even if they haven't been criminally prosecuted which we've done in the past couple of cases or as we're doing now conducting investigations under the authorities that are already in the law that would allow us to ban these people from working -- >> i take it what you're saying is you don't know of any criminal prosecutions in these three banks that the fed has recommended? you have investigated enough to know that these banks are responsible, they have given -- they have admitted to wrongdoing. they have signed up for $35 billion in a settlement and no one has been referred? >> senator, we've shared all the information that the department of justice needed and i think the justice department has made
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its own assessment on both sets of criminal and civil proceeds. >> you say you have referred people for criminal prosecution. >> no, we've provided information -- >> you've not actually referred somebody for criminal prosecution. i want to be clear about the contrast here. after the savings-and-loan crisis in the 1970s and 1980s, the government brought over 1,000 criminal prosecutions and got over 800 convictions. the fbi opened nearly 5,500 criminal investigations because of banking referrals. if we didn't limit to it these three banks how many prosecutions have you all regulated? we have to remember here is the main reason that we punish illegal behavior is for deterrence, to make sure the next banker who is thinking about breaking the law remembers that a guy down the hall was hauled out of here in handcuffs when he did that. these civil settlements don't
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provide deterrence. the shareholders for the companies pay the settlement. senior management doesn't pay a dime. and, in fact, if you're like jamie dimon you might even get an $8.5 million raise for the settlement of negotiating such a great settlement when your company breaks the law. so without criminal prosecutions the message to every wall street banker is loud and clear. if you break the law, you are not going to jail, built you might end up with a much bigger paycheck. so no one should be above the law. if you steal 100 bucks on main street you probably are going to jail. if you steal a billion bucks on wall street, you barnwell better go jail too.
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so i have another question i want to ask about and that's about living wills. that is the plans that big banks are supposed to submit now so if they start to fail they can be liquidated without bringing down the economy or needing a taxpayer bail out. last month the fdic and the fed as we talked about earlier sent letters to 11 of the country's biggest banks telling them their living wills didn't cut it. you said that if these banks failed either they would need a government bail out or they would bring down the economy. these letters confirmed quite literally that six years after the financial crisis all of our biggest banks remain too big to fail. now, in your joint statement you said and i want to get this right that by next july 11 banks must demonstrate quote, significant progress to identify the shortcomings identified in the letter and if the banks don't you told senator corker earlier you have tools to for
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the banks to make changes and i just want to underline. that means higher capital standards, higher liquidity standards, restrict bank growth, limit bank operations. but these actions take place only if there's not significant progress on the part of the banks. so, i just would like the two of you, fdic and the fed just to speak briefly to the question because i realize i'm out of time here, mr. chairman, what constitutes significant in this case? what is it you want to see the too big to fail banks do and if they don't do it the action you're going take. chairman maybe we can start with you? >> senator, we laid out in these letters a pretty specific set of markers for these institutions to meet that i think goes to really some of the key obstacles to orderly resolution of these firms. we directed them in the letters
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to simplify their legal structures so that they put their business lines in line with their legal remedies so you can sort the firm out and figure out how to manage the failure. critical issue is their derivative contracts. those contracts provide for automatic termination in the event of the beginning of insolvency proceeding, those contracts need to being changed in order to avoid the consequence insurance we saw in 2008 from a disorderly termination of those contracts. we direct in the letters, the firms to change the contracts. critical operations.
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the firm has got to be able, during the course of a resolution process to maintain the i.t., other critical operations so it doesn't fall apart. you may have an i.t. operation in a foreign jurisdiction that could get taken out or not made available as a result of the problems made by the institution. the institution has to develop back-up capabilities to sustain critical operations otherwise the public ends up having to pick up the slack. information. the institutions have to be able to produce critical, timely information that is essential to managing a resolution process. the firms right now don't have that capability. these are specific measurable actions that we have directed the firms to take. i think we are going to be looking for the firms to take specific measurable actions to address these. they have a year now. they are on notice. i think we are going to work closely with the firms so there's clarity and we are going to expect action.
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>> if i could underscore the last point marty made, senator, none of us wants to be in the situation where next july or august there's a situation, well, we made this progress, is this significant or not. what marty alluded to is the point i was going to make and will now underscore. we have supervisors from the fed and fdic in the institutions right now. this will be a process of what are you going to do about this and wanting to hear in tangible terms what they are doing. i know at the fed and fdic, the boards will be briefed on this so we will be in a position to give indications that this is what we expected or you guys are already falling short. i think what laid behind your question was the concern next
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july we get into whether progress is significant or not. >> we are not going to be back here a year from now having this conversation again? you are prepared to demand they take measurable steps. if they fail to do so, you are going to use your tools to take them for them, is that right? good. thank you. >> thank you, mr. chairman. >> i want to follow up on senator warren's observations regarding the justice department and criminal activity and financial institutions or whatever. i realize that you are regulators, you are not prosecutors, but if there's $35 billion more or less in fines and settlements because of criminal conduct and there's no justice, justice is important for the big and the well being
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and also small. something is wrong with the justice department. people shouldn't be able -- whoever they are, not just financial institutions, should be able to buy their way out of culpability, especially when it's so strong it defies rationality. i agree with her on that. i think senator warren goes to the justice department. i'm not defending our regulators because i call them at task at time. they can make recommendations and send things over. ultimately, it seems like the justice department seems bent on money rather than justice. you know? that's a mistake. the american people pick up on that. having said that, governor, i want to get back on the insurance regulation, if i could.
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have you or others, have you consulted with any of the state regulators in making the designations and if you have, what did they say? for years, we all know this, the states have regulated insurance. we know the story of aig. we hashed it out here many times. aig was not running the insurance company. they had visions but they got out of there basic stuff and it caused them great harm, as we all know and caused headaches here in this committee and with you guys. but, as metlife and prudential, to my knowledge they haven't been involved in credit default swaps other than managing their own risks.
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i don't know. you might have a better feel for this. have you consulted or dealt or had dialogue with the state regulators before you make the designations? if you have, what did they say? if you haven't, why haven't you? >> first, senator, i'm sure you know that on the f stock, there is a slot reserved for a representative of the insurance commissioners and there's also, by statute, an independent insurance person who also brings to bear expertise and they have been fully involved. i would be reluctant to speak for them here, but they are fully involved and other commissioners in the naic have been as well. >> is this, you know, the states regulated these insurance companies for years. this is new for the federal government and for you.
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is this the beginning of a preemption of the federal or the state in the regulation of insurance? some people would argue that. >> certainly not from the feds point of view. there are two ways to get supervision of entities, their own buyer included insurance firms. one, they own a depository institution or two, if they are designated by the fsoc. when they are designated by fsoc, it's because of their importance and our supervision and oversight regulation of those institutions is directed toward containment of risks, not their insurance business. as i said earlier, i don't think, i at least, don't regard generally traditional insurance activities as posing systemic risks. it's non-traditional, the new things where we see similarities
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that are more toward rentable assets and the like. the sort of thing we are regulating. we don't want to be in the business of regulating insurance companies the way state insurance commissioners do which is trying to preserve the franchise for the benefit of the policyholders. our purpose is a different one, ensuring the safety and soundness of a large financial institution. >> sir, let me ask you a question of -- if i could. >> one more question. >> i have to ask a long question. would a big insurance company, we'll use metlife or prudential or anybody that was managing their own risks through derivatives, would they be considered, for the most part,
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an end user?%/z7hóú;z >> generally, our consideration of end users applies to companies that aren't primarily financial in nature. >> like steel and all this? >> exactly. large insurance companies who have a lot of swap activity we would not consider. >> okay. thank you. thank you, mr. chairman. >> i want to thank today's witnesses, again, for their testimony. this hearing is adjourned.
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coming up this weekend on news makers, steny hoyer talks about the president's plan for isis.
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politics and the mid-term election. see news maker on sunday at 10:00 a.m. eastern on c-span. and on tuesday the senate armed services committee will hear from chuck hagel tuesday at 9:30 eastern here on c-span 3. cms administrator, marilyn tavenner, gave an update on the health care law. she spoke about the next phase for the marketplace exchanges, healthcare.gov, and the next open enrollment period which begins on november 15th. good afternoon. it's a quiet group. first of all, thank you, nancy, and thank you for letting me
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work this into my schedule. i do appreciate it. i also -- i have not taken a lot of speaking opportunities of late because as you might imagine, we are gearing up for a year or two of open enrollment. seems like we just ended but we are getting ready to start again. but i felt it was a good opportunity, and i also like the topic by definition, and basically the topic is future of health care, aca and beyond, and i really think that that's what we're about at hhs and with this administration and with cms, so i want to talk a few minutes about that. if i try to define our work and for those of you that i talked to informally, this will not come as a surprise. i tend to think of our work as being in three large buckets. none of those are named the
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affordable care act or obamacare, but they are named subtitled that i think all of you would find as critical as to why we are here today and basically why the industry of which i have been part of all my life spent the last 20 or 30 years talking about this topic. so i would like to talk about access, and i would like to talk about quality and i would like to talk about costs. let's take access first, because i think people tend to gravitate towards access because it's the right thing to do. i think it's definitely been the focus of attention over the past 12 months, first starting with the work in 2012 around medicaid expansion, and then in 2013 with the rollout of healthcare.gov, so i want to talk a little bit where we are with access today. and i know that you all have heard, many of you have written
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about the millions of individuals who are in the marketplace through a combination of state-based and federal marketplace work. equally pleasing is more than the 6 million people from the recent estimates that are new enrollees in the medicaid and c.h.i.p., and then there were talk about individuals staying on their parents' policies until age 26, and we picked up new enrollees. you tend to think about how does the website work and how do i get in touch with this consumer and what do i do to handle this person's appeal? but you don't think about the end result until this summer. even then while we ended up in a much happier place than where we started, the proof is in the results. the results by my account seem to be pretty phenomenal.
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i will not talk about the numbers i just read. i will talk about more independent reports. if you follow gallup, gallup's most recent report found the adult uninsured rate fell 13.4% in the second quarter of 2014. i think all of us would agree that that was one of the toughest markets that we were trying to get insured. second the new england journal of medicine recently reported that 10.3 previously uninsured had gotten coverage. and then we had to pause and reflect. i would be remiss if i did not talk to some of my colleagues here, brad and joe, both were a big part of that effort,
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obviously around the federal and state-based marketplace. we never would have gotten through the last year or got the results we got if we would not have had great working relationships with consumers and advocates for sure, and with issuers, and i do mean issuers nationwide, if we had not had great partnerships with state medicaid programs and just with the public in general. each of you all should take a moment and we should all congratulate ourselves on what we have done to lower the number of uninsured. [ applause ] so that's one part. but then there is the second part, which is insurance is still expensive. it still takes a big bite out of anyone's individual income. i am a big fan of economics and
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i know many in this room are as well, so when we start to talk about what does access look like for the future, if we think about the marketplace first, i think we would all agree that what promotes good pricing and good quality products are affordability, competition, and high quality results. and that's what the partners that we are working with today are all about. and i am happy to report that in 2014, on average, consumers could choose from about 47 plans, and that's a lot of competition. while 2015 is still under review, what we are seeing in 2015 is an increase in the number of applications by issuers and that amounts to more plans because each issuer normally provides more than one plan. and the premium increases that we have seen, while they
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certainly vary by market as we would expect, have overall in the recent reports have been talking single digits, and that's proposed and not final and it's still a work in progress, but i think it's a good sign for year two in the marketplace and it's a good sign for employers and a good sign for medicare, which i will come back to in a moment. in 2014, what we did find is that 7 out of 10 consumers using obviously tax credits were able to receive coverage for $100 or less a month, and that nearly half of those are 46% -- or 46% got covered for $50 a month. and back in the '90s, and that seems like a long time ago, we would try to present different times of covering programs and we were trying to get to the price of an individual, if we could say your insurance doesn't cost any more than your cell phone, we thought we might have
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a shot at it. now when we look at the progress, cell phones have gone up, too, and so has insurance. so as we plan for year two, what we are doing is building more options for consumers, and educating them about the options and helping both first-time and newly insured consumers learn about their benefits, their eligibility requirements and their financial protections. at the same time we recognize that year two brings its own set of challenges, unique challenges, i might add. which is why we will talk about, and you saw the rule and the accompanying material yesterday about renewing coverage as simply as possible. sit as simple as we would like? absolutely not. have we made a lot of progress? yes. we hope individuals coming back to the market will look and shop
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and will update their tax credits and income information and their family changes, but we also recognize there are a lot of people who may not have had changes from last year, and so it will be easier for them to default to an automatic renewal, and we are encouraging that, the same way mostly you and i buy insurance products, and the same way medicare works. we want to make it easy for people to re-enroll, and we obviously have a whole new group we will be going after again in the next ranks of the uninsured. we launched in the spring a program called coverage to care. because not surprising many of you in this room could have told us this would happen, and once many became insured, many of them did not know what to do with the insurance they recently
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acquired, so there were a lot of questions and many issuers did a great job of out reach on the topic and we had to do the same thing working through the office of minority health, and we partnered with navigators and others to try and get information out, and with year two we will see more and more of that. last area, and then i will leave the marketplace, has to do with what about the next group of people that need to be enrolled in 2015? so we are in the process of doing our analysis again, many times with external partners about where are the next pockets of the uninsured? where do we need to reach out to next to get to the next group of folks so we can continue the march forward on reducing the number of insured? now we move to quality. i have been here almost five years now, and i would say over
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the last five years we made a great deal of investment in both quality and improvement and quality systems and the work that has gone on around meaningful use and electronic health records, and we started to see results such as the 9% reduction in harm in hospital acquired infections and we have seen and been able to document 150,000 fewer hospital admiss n admissions from 2012 to 2013, and we have seen more than 70% of hospitals adopt some form of electronic health records. these accomplishments have been significant, and wherever possible, and i think it's more common than not, we have been able to align with private insurers to make sure we are not confusing the market, whether the market is a consumer or physician or a hospital, but we would all agree that there is still much work ahead and we
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will continue to work in these areas. i think what you can look for in the future from the cms side of the house is that we will continue to tie quality measures to those of outcome, not process, and we will continue to take those measures and leverage them within our existing payment systems. this work is underway in medicare fee for service and underway in the programs many time in the private side of the house and same is true in medicaid, and it's slowly being adopted through the payment system. the second type of reform as it relates to quality is we will be creating reforms and we have created and will work with partners to create reforms focused on creation, significant and efficient care, and obviously aco's come to mind [pzpsmñ and others.
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to date we have over 360 acos that have been established through the medicare program and the results for the first 114 acos and 2014 show they generated 128 million in savings for the medicare trust fund. this is an early example of the type of work that will expand to state providers and others in the coming months and years and you may see the work we are doing in the state projects. i think you can follow the message around quality. it will continue to be outcome oriented. we will continue to leverage it to payment strategy and we will spread it across the entire spectrum of medicare at the same time -- and i will let my private partner speak for
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themselves, a lot of the same work is going on in the private specter. that's good because we need to be aligned. it's easier for consumers and provider to understand if we are all moving in the same direction. third area is costs. in the past four years we have seen historically low costs in overall health care spending and that has continued into 2014, and that translates into stable premiums for medicare part b, and beneficiaries being able to save on drugs and care, and trust fund solvency being ext d extended to 2030 or four years beyond what was projected in last year's report. what can we expect for costs? it's going to be a big issue for us, and while we certainly know that there has been a lot of factors that have led to the low cost in the last four years, we
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certainly don't take that for granted, and we consider this probably a period of where we can really move quickly to address what will be a rise back in costs. so i think that these reforms that i am talking about, whether it's on the marketplace side -- and when we talk about the marketplace, remember there is a lot of things that we don't have to address again. we have already handled mlr. we have handled preexisting conditions. we have handled renewability. we have created working together, all of us together a. whole new paradigm or a whole new world in health insurance and health insurance delivery, so the question is how do we now take those great things that have been done and tie it to affordability and tie it to cost improvements and tie it to quality? i think that we can expect that we will continue to work with employers, consumers and the private sector to get that done.
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second, we will continue to look at every opportunity to more closely connect quality and payment. and can you look for us to continue to move from volume produced to outcome and overall costs as our measures of what is good and what is working. we will partner with states in these efforts, through the state innovation projects and work more close with business to make sure our efforts are aligned. and we will continue our efforts on public release of data to help employerers and businesses make the best decisions regarding quality and cost of care. over the last five years, we have been given those tools, information to move forward. the health care cost trends have certainly helped but there is still much work ahead, and i look forward to working with each of you to get it done. thank you. [ applause ]
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>> thank you, marilyn. we really appreciate the extra effort you made to be here, and i think it really speaks to marilyn's professional dedication that we have all witnessed from both sides of the aisle, so thank you so much. really we appreciate it. her comments service the perfect opening to the broader conversation about the future of health care in america. our goal for this event is to pull together people who are shaping the health care system, but are doing it from different perspectives and from different roles, and that's what it's all about, we want to bring the smartest people together who are driving the change but viewing things from different perspectives, and through that cross fertilization, we hope to spark new thinking and have a positive impact on our health care system. it's a nonpartisan organization
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focused on creating positive change, and we do this by supporting imperial kul research and by convening influential stakeholders and recognizing excellence through awards. several, all four whom are here today, including our chairman, brad wilson. brad is the president and ceo of blue cross blue shield of north carolina, the state's largest health insurer serving almost 4 million customers. prior to joining blue cross nearly 20 years ago, brad practiced law and served as general counsel to the governor of north carolina. as ceo, brad really brings a very pragmatic and optimistic view of the future and he is really helping his company transform what is happening in north carolina, but is also playing on the national stage by
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contributing a lot of his great thinking. so with that, brad, please come up. well, thank you, nancy. it's good to be here. let me congratulate you and your team for putting this conversation together. it's an important one, and we're certainly proud to be part of it, and nancy and her team, as she just briefly eluded to, does fabulous work throughout the year bringing well informed information to awful us so we can make better decisions in the health care space. let me also begin by thanking all of you that are here that work in the public sector. we appreciate your commitment and your dedication, and the hard work that you bring to the conversation that we are about to have here today. all of the -- all of us in this room have a certain amount of
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knowledge about the challenges that face our health care system. a system that's the most expensive in the world, but yet does not deliver the kind of value of quality that we need, tkau deserve and expect in america. i appreciate the opportunity that you are giving me today to share with you some of my perspectives. today i just want to focus on two things. two things that are necessary to make health care better. a bigger role for consumers, and a bigger role for collaboration. if we are going to improve the quality of health care in the united states, slow the rate of costs that push up health insurance premiums, get more people covered, all of these things are the essential things
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that we must do in order to get value out of the $2.8 trillion we spend each year, then it is simply up to all of us to get it done. why is it up to us to get it done? because we're all health care consumers. and we were consumers yesterday and we are consumers today and we are going to be health care consumers tomorrow, and as such we are in the best position to lead the transformation of health care in our country, so today i want to ask you to do me a favor and put aside whatever your title is, whatever reason it was that you were invited here today, lay that segment representation aside and look at health care transformation through your lens as a consumer of health care.
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now, as nancy said, i am the ceo of blue cross blue shield in north carolina, but i am definitely and certainly a health care consumer. in the past two years i have had rotator cuff surgery on both shoulders, but for me unfortunately it was not one surgery per shoulder, had a total of five in order to get two shoulders working well again, so i can tell you that in and of itself qualifies me as a health care consumer. and i learned many things during my experience. one was that despite having the best hospitals and physicians in the world, the most advanced medical technology, the best medicines to treat most of the health issues that we all face, the consumer must play an increased role in his or her own health care. as individual consumers of health care, we must engage in
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healthy behaviors across the course of our life. we must engage in preventive practices and we must be fully compliant with the care detectives that come from our physician partners when we ask them for help and access care. so i would submit to you that transformation begins with our own behaviors. by the way, the word choice that i have used today consumers, not patients, is very deliberate and intentional. we must engage consumers in their own health all of the time. not just when they have a medical emergency or a health circumstance that causes them and drives them into the health care system. i think this is especially true when we think about how we are going to improve health at a time when more than half of
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americans live with some type of chronic condition like diabetes or obesity. it's a very daunting statistic and one that is getting worse rather than better. so looking through the consumer lens, how can we make health care better? well, for starters, and marilyn eluded to this, we must make health kaecarrie care easier to understand, and there is no question about it, we have a very complicated system. if we must assign blame, and there is pwhrepb tea of that to go around, it extends across every entity that is involved and engaged in health care, including my own line of work. i believe that insurers have failed consumers by not providing timely transparent information about what things cost, quality outcomes, or how the system really works,
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offering advice and guidance about how to navigate the system more efficiently. lots of people still think the $20 co-pay is the entire and total cost of their office visit. but we're working on changing that. understanding and navigating our complex health care system is certainly a real issue for the 8 million americans who enrolled under the affordable care act. across the system of blue cross blue shield plans around the country, we have fielded countless questions about benefits, networks, costs and the very simple question, what do i do next? one of our individual sales managers in north carolina tells the story about a community presentation that she was making in a small town one evening during the aca enrollment period. a few minutes into explaining the aca and covering options on
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the exchange, a hand went up and asked this very direct and simple question. what is a deductible? she decided to scrap the presentation and just talk to folks about how the basics of health care work and how it inner relates to health insurance.
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